EigenLayer seeks to not only boost the growth of its EIGEN token, but also to build a complete Web3 ecosystem around it to boost its utility and possibilities in its community.
Ethereum’s restaking protocol EigenLayer has recently unlocked its native token EIGEN, a significant milestone in its Web3 proposition. This move not only amplifies the usage and potential of EIGEN, but also has the potential to boost its price and acceptance in the cryptocurrency market.
What is EigenLayer and what role does the EIGEN token play?
EigenLayer presents itself as a restake protocol which allows users to use their Ethereum (ETH) tokens to restake them and thereby secure other decentralized services, known as Actively Validated Services (AVSs). This means that users can participate in multiple protocols at once, maximizing the use of their capital.
On October 1, 2024, EigenLayer unlocked its EIGEN token, allowing it to be traded, transferred, and used for staking. According to CoinMarketCap, EIGEN debuted at a price of €3,4, corresponding to a fully diluted market cap of €5,7 billion. This launch has generated a huge amount of interest in the market, with around 43% of the trading volume occurring in the EIGEN/USDT pair.
EIGEN, beyond resttaking
But EigenLayer is looking to take the EIGEN token beyond being simply a “restaking” token. On its website, EigenLayer explains that the EIGEN token is designed to empower the EigenLayer ecosystem, offering a complementary role to ETH resttaking. It does this by introducing a mechanism to handle “intersubjective” failures, or behaviors that are not identifiable on-chain but warrant a penalty. With this mechanism, EIGEN provides a way to fork the token without forking the Ethereum mainnet consensus.
Strategies to amplify the use of EIGEN
So, basically, EIGEN is intended to be a gateway to a complete platform of solutions built around EigenLayer. And to achieve this, EigenLayer has several strategies in place to increase the use of its EIGEN token:
Programmatic incentives for users
One of the most notable strategies is the implementation of a programmatic incentive program for EIGEN stakers. This program is designed to reward users who actively participate in EIGEN staking and AVS validation. According to Sreeram Kannan, founder of EigenLayer, approximately 4% of the total EIGEN supply is planned to be distributed as part of these incentives. This will not only encourage participation but will also help establish a sustainable and vibrant ecosystem.
Development of Actively Validated Services (AVSs)
EigenLayer has identified more than 60 AVSs that are in development, This demonstrates the growing demand for services that can benefit from the security provided by EIGEN. These services span a wide range of applications, from oracles and random number generation to databases and storage. As more AVSs launch and adopt EIGEN as part of their infrastructure, demand for the token is expected to increase, which could drive up its price.
Focus on consumer adoption
EigenLayer has also charted a clear path towards consumer-focused Web3 application adoption. Initially, it will focus on cryptocurrency-native applications such as decentralized finance (DeFi) and gaming, before expanding to broader markets. This “inside-out adoption” strategy will allow EigenLayer to build a strong base of engaged users and developers, which in turn can increase utilization of the EIGEN token.
Innovative security mechanisms
EIGEN’s unique design allows for intersubjective faults to be handled through a process called “intersubjective forking.” This mechanism allows users to propose a fork in the event of a perceived intersubjective fault, providing an additional level of security and trust in the use of AVSs. This not only improves the security of the protocol, but can also attract more users and developers looking for a robust and reliable solution.
Impact on EIGEN price
The implementation of these strategies has the potential to significantly impact the price of EIGEN. As more users and developers adopt the protocol and use the token, the demand for EIGEN will likely increase. This could lead to an increase in its price, benefiting stakers and those who have invested in the token since its launch.
Furthermore, the fact that EigenLayer is targeting an expanding market such as Web3 applications could result in a broader acceptance of the token in the cryptocurrency market. As more applications begin to integrate EIGEN into their operations, the token could become an essential component of Web3 infrastructure, which could also attract the attention of institutional investors.
However, it is not all good news. EigenLayer also faces significant challenges. The recent drop in the protocol’s Total Value Locked (TVL), which has decreased from around €18 billion to approximately €10 billion, raises questions about the protocol’s short-term sustainability.
It is therefore crucial that EigenLayer addresses these issues proactively by maintaining transparency and communication with its community. Trust is essential in the cryptocurrency space, and any erosion of this trust could have negative repercussions on the adoption and price of the EIGEN token.
